The GDP report. Final sales are still weak; an actual increase in inventories for the first time in years increased the headline number.

I 07

II 07

III 07

IV 07

I 08

II 08

III 08

IV 08

I 09

II 09

III 09

IV 09

I 10

Gross domestic product

1.2

3.2

3.6

2.1

-.7

1.5

-2.7

-5.4

-6.4

-.7

2.2

5.6

3.2

Services

1.61

.76

.60

.15

.85

.17

-.60

.26

-.13

.09

.37

.49

1.15

Nondurable goods

.48

-.13

.33

.27

-.49

.35

-.94

-.78

.29

-.29

.23

.63

.61

Durable goods

.45

.18

.42

.44

-.75

-.46

-.95

-1.64

.28

-.41

1.36

.03

.79

Change in private inventories

-.61

.32

.19

-.63

-.21

-1.25

.26

-.64

-2.36

-1.42

.69

3.79

1.57

Fixed investment

-.43

.59

-.04

-.66

-.99

-.41

-1.30

-3.28

-6.62

-1.68

-.15

.61

.10

Net exports of goods and services

-.29

.66

1.36

2.24

.36

2.35

-.10

.45

2.64

1.65

-.81

.27

-.61

Government spending

.00

.82

.75

.31

.51

.71

.95

.24

-.52

1.33

.55

-.26

-.37

Update: I'm still looking for commentary on the net exports statistic. Note that domestic consumption is fairly strong for the latest quarter; the net export number comprises an increase in exports, but an even bigger increase in imports.

Information received since the Federal Open Market Committee met in JanuaryMarch suggests that economic activity has continued to strengthen and that the labor market is stabilizingbeginning to improve. Household spending is expanding at a moderate rate Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly . However; however, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has been closingclosed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and; it closed on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financiala build-up of future imbalances and increase risks to longer-runlonger run macroeconomic and financial stability, while limiting the Committee's flexibility to begin raising rates modestly.

My feelings on the morality of non-recourse mortgage default have changed a bit over the past year or two, and I want to babble a bit about my current feelings.

I want to start with an affirmation of the belief that a moral code restrained only by what can be written into formal law is not going to work. If you go through law school and brainstorm for cracks in the system to figure out where you can tiptoe around the edges of laws on extortion, fraud, and harassment, you may be legally in the clear, but you're still an asshole. On the other hand, particularly where the law is clear and deliberate, it's a reasonable starting point as to the social consensus on appropriate behavior. Further, because housing is likely to be a large part of an average homeowner's net wealth — indeed, in a typical case the homeowner's net worth is less than the market value of the home — tail risk is likely to be particularly odious to the homeowner, and I can imagine that many well-informed people in good faith would be willing to buy a house if they can only lose everything they put into it, and that many well-informed banks acting in good faith would find these to be reasonable terms on which to offer a mortgage. Certainly if the contract is explicitly non-recourse, then, but even if it is only implicitly non-recourse because of the state in which the contract is written, I think it's reasonable for an underwater homeowner to exercise the implicit put option on the house. (For small lenders — say seller-financed mortgages — that are unsophisticated, and reasonably so, and likely not to have realized they were writing a put, I feel a bit differently, especially if the buyer was unaware of the option until things went south.)

I also think that if you're looking at bankruptcy and/or starving your children, and you think the bank won't bother coming after you, that it's fairly reasonable. You should start by approaching the bank about a formally-sanctioned short-sale, but banks are overwhelmed these days; if you're facing a situation in which you really can't meet all the obligations you've incurred, bankruptcy law is supposed to settle which ones take priority, but for the most part I don't think it's terrible if you make some changes in that outcome, especially in response to transaction costs. I think secured lending for cars and houses should be treated in bankruptcy the same way as other secured lending, and my opinion as to what the law should look like probably colors my opinion of the ethics of actions related to that. In these situations, though — where you're illegally breaching your contract because you expect nobody to bother dealing with you — I'm not going to morally clear you unless you're acting in good faith in various ways; don't buy a new SUV the next month, or a big-screen TV for that matter, or keep such items if you can liquidate them for a reasonable value. This is for a legitimate bankruptcy-type situation, and it becomes sketchier the less effort is put into pursuing formal channels.

The final case is that in which a borrower can reasonably keep making payments and keep food on the table, but is unwilling to downgrade (say) the quality of that food, or the amenities of the lifestyle, and decides to skip out because he expects not to be worth the trouble to pursue. I hope that person chokes to death on his steak.

Could this work as an efficient congestion pricing system? Yes, if people were doing their own homework regarding traffic conditions and using that information to determine whether the toll was worth it. ... Does it work? No, since rather than checking the traffic reports, people are using the price itself as a signal of the traffic level. So what seems to be happening is something like the following: A few dudes who are really in a hurry choose the pay lane, just to be on the safe side. This raises the toll, and then other drivers see the toll increase and think “wait, what do these other guys know that I don’t?” and also choose the toll lane. This further increases the toll rate, ....

If the signal proves unreliable, this isn't an equilibrium; equilibrium can take a while to develop, but should eventually do so in a situation like this. Listening to radio traffic reports may currently be fairly profitable in Miami.

If I were ambitious and a bit more technically savvy, I would produce something like this for the web that would generate 2-D diagrams with critical lines on them, such that you could look at a graph of break-even rent vs. price appreciation and the like. Actually, I think I have an excel spreadsheet online somewhere; if you have excel on your computer and want to try playing around with this, it's not as fully functional as the other calculator, but it might have its own charms. (Or not. I'm not on a computer with excel at the moment.)

He singled out the congressionally chartered mortgage companies, Fannie Mae and Freddie Mac, which were major consumers of subprime mortgages. Republicans on the commission, particularly former Bush administration adviser Keith Hennessey, echoed that concern.

Mr. Greenspan suggested that Fed critics have lost sight of the political atmosphere that prevailed at the time. "I mean, I sat through meeting after meeting in which the pressures on the Federal Reserve—and on, I might add, all of the other regulatory agencies—to enhance lending were remarkable."

Better regulation by a dictator would have been conceivable. It's possible that, in a political democracy, the regulation we had was rather closer to as good as it was going to get.

The Bureau of Labor Statistics releases its March employment data tomorrow morning at 8:30; an hour later, staff will have a live Q&A on the web. You can submit your question ahead of time, and, while I hope they answer some questions that won't be possible to formulate until 8:30 tomorrow, if you have one formulated now, that might be the way to go.